Sep 072021
 

Facts of the case:

S had engaged the services of the assessee for collection of the subscription amount against the commission and the assessee had remitted the entire gross amount received from the cable operators to S. The amount remitted by the assessee to S included the number of TDS deducted by the cable operators at the time of payment made by them to the assessee.

The assessee company filed its return of income for the assessment year 2010-2011 on 24.09.2010 declaring an income of Rs.13,62,81,800/-. The Assessing Officer while computing the assessment under section 143(3) of the Act, assessed the income at the same figure of Rs.13,62,81,800/- However, the Assessing Officer had not allowed the assessee’s claim of credit for TDS of Rs.2,46,80,256/- on the ground that the concerned income was not offered to tax in the return of income. The Assessing Officer in his order on noticing that the assessee had not included the subscription charges of Rs.86,34,97,146/- corresponding to the TDS amount of Rs.2,46,80,256/- in the Profit and Loss account, disallowed the credit for the corresponding TDS.

Arguments in favor of allowing TDS credit are as below:

  • Since tax had already been deducted and paid to the Government at the time of making collections, it (the assessee) was entitled to get the credit of the same while receiving commission income.

 

  • The amounts collected by the assessee were credited to the separate account ‘Subscription Charges’ and the said account was debited at the end of the Financial Year when the amounts were paid to S.

 

  • As the subscription collected by the assessee from various cable operators was not the income of the assessee, the same was not shown in its Profit & Loss account.

 

  • The fact of the situation was that the cable operators were deducting tax at source on the payments of subscription made to the assessee, whereas, the assessee was remitting the gross amount to S.

 

Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) and finally to High Court.

Analysis of facts:

  • To examine the same, the Bench called for Profit and Loss account and Ledger accounts to know, how the subscription received was accounted in the assessee’s books. The assessee’s counsel filed only financial statements and not filed ledger accounts of subscription received accounts.

 

  • Hence, we are not in a position to express any opinion whether the assessee is having an element of income from subscription charges received from various parties.

 

  • Therefore, if the entire subscription received by the assessee is transferred to S and the assessee is entitled only to commission on subscription income, then TDS credit may be allowed to assessee.

 

  • The assessee was entitled to a fixed commission on the collection amount on behalf of S. The Agreement dated 14th October 2002 were self-explanatory about the services provided by the assessee with regard to the collection of Subscription Charges on behalf of S for a fixed commission and that the Agreement was entered as early as on 14th October,.2002 (i.e.) much prior to the Assessment Years 2009-10, 2010-11 and 2011-12.

 

  • These collection charges had been credited to the account “Subscription Charges” as and when they were billed and this account had been debited at the end of the financial year when the same was paid back to S.

 

  • The amounts in question had been routed through the accounts maintained by the assessee, which formed part of the Balance Sheet and in turn, formed part of the Profit and Loss Account and therefore did not partake the character of income or expenses or capital in the hands of the assessee.

 

Conclusion:

Thus, the assessee was entitled to receive a credit of the tax deducted at source under section 199 of the Act subject to production of TDS Certificates received from respective deductors.